# All Questions

12,263 questions
7 views

### Opposite of Value-at-Risk. Criteria for Optimization

I'm trying to optimize portfolio of undervalued and portfolio of overvalued stocks. I have simulated scenarios of stock returns, and based on them I would like to find optimal weights. One criteria is ...
12 views

### where does the 4h term come from in the “viscosity solution” of this dynamic programming solution of a quasi-variational inequality?

On Page 151(Section 5.4) of Optimal Control in Limit Order Books there is a numerical scheme defined via a time discretization of a system of quasi-variational inequalities My question is, where is ...
18 views

### What are some beginner quantitative option trading strategies?

I'm new to quantitative trading, with good knowledge in finance and coding (mainly Python, Java, R, etc). I would like to know if there are any basic quantitative option trading strategies that can ...
16 views

### Finding B(t) in the Vasicek model relating to the bond equation, more specifcally from the initial condition

In the Vasicek model for derving bond prices, we have the ODE $$\frac{dB}{dt}=\gamma B-1$$ which gives rise to the general solution $$B(t)=C_1 e^{\gamma t}+C_2$$My problem is that we have the "initial"...
19 views

### Rationale for describing kurtosis as “peakedness”?

Despite plenty of evidence to the contrary, many quantitative finance sources of information, including teaching resources such as CFA prep, persist in defining kurtosis as a measure of "peakedness." ...
13 views

### Python Code to generate quasi random standard normal numbers using sobol sequences

I am trying to generate quasi random standard normal numbers. I understand that we can use sobol sequences to generate uniform numbers, and then use probability integral transform to convert them to ...
32 views

### Building a financial time series database for storing large scale historical securities datasets

I am building a time series tool for my own use. The database stores large scale securities historical datasets ( ie securities, prices, macro economic data, trading transaction accounts, supporting ...
29 views

### How to calculate impact on portfolio with various asset classes

I was given a portfolio consisting of equities, commodities and high-yield bonds and respective weights. I also have correlation data of different asset classes and standard deviation of each asset. ...
26 views

Q: In the passage below, is the implied forward rates (expect return) considered the same as the market implied return from forward rates (unexpected return)? For instance, Expected return = Implied ...
20 views

### Help!! how can do i compute bond price with YTM in python? [on hold]

Given FV = 1000 coupon rate = [0.01, 0.015, 0.023, 0.038] ytm = [0.016, 0.021, 0.045, 0.065]
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### how to test OMS functionality via FIX?

Has anyone done app dev that tests OMS functionality ( FIX ) ? Do any brokers or other financial entities make test apis available ?
24 views

### Achieving an even distribution of orders in the queue

Market Making under a Weakly Consistent Limit Order Book Model contains the following paragraph "The market maker may achieve her target execution profile by continuously adjusting her limit ...
37 views

What are reliable sources to download plain-text files listing current composition of various popular indexes such as S&P 500 (SPX) or Dow Jones Industrials (DJI) or Nasdaq 100 (NDX) ? At a ...
39 views

### Computing FX forward returns using spot returns and an existing term structure

Sorry for the naive question, I am new to the area. I have YTD spot returns on the USD/GBP pair and a forward yield curve. How would one go about computing the forward returns in 2 years using this ...
23 views

### Local Volatility calculation in Python

I am trying to price Local Volatility in Python using Dupire (Finite Difference Method). I have following set of information Spot: 770.05, Strike: 850, Type: 'C', rfr: 0.0066, time to maturity = ...
33 views

### Expected value of stochastic optimization

I have a optimization problem where the SDE is: $$dX(t) = [X(t)(u(t)-\beta(t))+\theta(t)]dt+X(t)u(t)\sigma dW(t), t \in [0,T], X(0) = X_0$$ where $u(t)$ is the portfolio, $\beta(t)$ and $\theta(t)$ ...
36 views

### How to hedge x gamma in callable prdc?

How do you hedge the short rates - fx cross gamma in a callable PRDC (Power Reverse Dual Currency note) ?
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### American look Back Option (put)

Hello everyone I'm having some trouble calculating the value of an american lookback put option using any other method but "similarity reductions", if you could kindly describe such method or provide ...
26 views

### ODE solving on GPUs using Python

I am building a financial model and i need to compute simultaneously the same ode with 6 different real-time time series datasets. As I have a mining rig of 6 Asus gtx 1070 8gb, can i use it if I ...
31 views

### Calendar roll terminology (buy vs sell)

I am trying to get the direction/terminology correct in futures calendar trading. Let's say I have two calendar futures contract where the prices are 100 and 102 reflecting the front and back ...
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### pricing deliverable vs non-deliverable fx forwards

I am trying to link these two questions together Pricing a regular FX forward This is a contract (say USD vs JPY) where you exchange 2 currencies at maturity at a pre-determined rate, while no ...
23 views

### How is a LIBOR Market Model volatility skew determined?

LIBOR based interest rates are derived from the prices (supply / demand) of swaptions, caps and floors. These prices are generally quoted in yield vols. Their prices are given by the Black formula. ...
34 views

### Temporal aggregation of daily implied volatilities

Suppose I have a time series of daily implied volatility values for a given month and I am interested in calculating the monthly implied volatility for that month. What would be the most theoretically-...
34 views

### Risk Measure-identication

Let X be a variable with existing moment generating function $M_x(z)=E[e^{zX}]$. Define the following risk measure: $\rho_{\alpha}(X)=inf_{z>0}(z^{-1}ln(\frac{M_x(z)}{1-\alpha}))$ Does anyone know ...
57 views

### Distribution of portfolio values with constant spending rate

If your portfolio is invested in an asset that follows a geometric Brownian motion, and you withdraw a constant dollar amount at the beginning of each year, is there an approximate analytical ...
34 views

### Solving for Implied Volatility Vega gets stuck at 0 (Python)

So my goal is to calculate option greeks with as few manual inputs as possible. I managed to get the IV for at the money options but then when I try further OTM strikes my results get completely ...
65 views

### Calculation of Bond returns

Given that I have a portfolio of High yield bond with USD 50. Duration : 5 years and Spread duration: 5 years CSI BARC Index (Barclay US Corp HY) is as below for the last 30 years. USGG10YR Index (...
36 views

### How to implement an investment strategy in MATLAB? [on hold]

Since I`m a total novice in MATLAB I am struggling with a question that might be not even really hard. I have to implement and backtest 4 heuristic investment strategies but literally no idea how to ...
42 views

### Scenario Analysis - Real life application

Given a portfolio consists of Stock = usd 40, Bond = usd 40, commodity =usd 20. Also given the correlation between these assets. Scenario 1 : stock down by 30% When performing scenario analysis, do ...
43 views

### What is needed in Brownian Motion [on hold]

What data is needed for Brownian Motion? I’m currently having an dummy firm, and want to simulate stock market using this dummy firm and firm data. How can I proceed this ? Edit: I have a simulated ...
36 views

### serial correlation and CUSUM results

I have the following CUSUM test resulted from autoregressive distributed lag models (ARDL). Does the CUSUM results show that the model is stable? I am a bit confused because the red line in CUSUM ...
51 views

### Is there an inverse relationship between (future-spot) price and yield?

If the difference between futures and spot prices rises will the yield for the current bond increase as well?
48 views

### DeMark Indicators

Would anyone know of a library in R that handles DeMarkindicators. Just wanted to check-in with the community before I invested a whole lot of time reinventing the ...
28 views

### Learning short-rate dynamics and how it affects optimal portfolio strategy

I'm looking for some advise. Here is the problem: For absolute simplicity, assume that we have one risky asset with price process \begin{align} dS_{t} = \mu S_{t}dt + \sigma S_{t}dW_{t}, \end{align} ...
35 views

### does anyone calculate substitution risk?

So a company can post collateral to borrow money (repo agreement) and they may have different options of collateral to post. I have to pay a return on their collateral while I hold it. Since, at the ...
69 views

### Portfolio volatility - Real life application

Given that a portfolio consists of Stock=USD 30, High-yield bonds(duration=5 years,spread duration=5 years) =USD 40 , Commodity = USD 30. I was given monthly data for MXWD Index for stock, CL1 Comdty ...
35 views

### how to simplify Inflation year-on-year option to Zero-coupon option

Belgrade 2004 paper basically proposes that inflation year-on-year volatilities (and hence yoy options) are basically the spread vols between the Zero-coupon vols from (t0 to T) minus the zero-coupon ...
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### Is it possible to create an instrument on the amount of beds sold within the real-estate market

I have been doing some research on the PBSA (purpose-built student accommodation) market around the globe. The market is growing year on year there is an index on this market the cbre. What ...
51 views

### How to build an inflation term structure in QuantLib?

This is what I've got, but I'm getting weird results. Can you spot an error?: ...
84 views

### Pricing a callable bond

I have read the Lehman Brother's paper on OAS which I mostly understand, they outline how to find the OAS for a callable bond of which the formula is effectively (ignoring refinancing costs): Market ...
51 views

### 1 day VaR vs 10 day VaR

Even while using historical simulation VaR, 1 day VaR is converted into 10 day VaR by multiplying 1 day VaR by Sqrt(10) for regulatory reporting purposes. What are the underlying assumptions for ...
105 views

### Difference between IRS and OIS

Is the understanding right that OIS can be accessed only by banks whereas IRS is for corporates. Also, since corporates borrow at Libor + spread, to hedge Libor I use IRS. Banks can borrow overnight ...
44 views

### Errata for Mark Joshi's Concepts and practice of mathematical finance

I am wondering if anyone has a PDF copy of the errata for Mark Joshi's book "Concepts and practice of mathematical finance"? It seems that Mark's website markjoshi.com is not accessible anymore. I ...
24 views

### Gueant-Lehalle-Tapia, reproducing figure 4

I'm having some trouble reproducing figure 4 from Gueant-Lehalle-Tapia Using the asymptotic quotes given by Left: sigma=0.4, A=0.9, k=0.3, gamma=0.01 Right: sigma=1, A=0.2, k=0.3, gamma=0.01 In both ...
33 views

### Statistical distribution of MACD

I was (unsuccessfully) trying to find results on what the distribution of the MACD values for a stationary time series with IID returns would be. Are there any such results or any that go in a similar ...
122 views

### When $E[f(\alpha,X)] = f(\alpha, E[X])$

When $E[f(\alpha,X)] = f(\alpha,E[X])$, where $f$ is some convex function of the first and second variables, except when the first variable takes the value $\alpha$ in which case the equality holds, ...
31 views

### Calculating Ex-ante Sharpe Ratio in multi-period setting

I have built a return process $\{x_t, t = 1,\dots,T\}$ for an asset. Suppose I have generated $K$ sample paths $\{x_t^j, t=1,\dots,T\}, j=1,\dots,K$. I think of two ways to compute the Sharpe ratio. ...
78 views

### Predicting portfolio returns

I suppose there are roughly two approaches to predict portfolio returns. Either predict the returns of all underlying stocks and aggregate all individual stock predictions, or predict the portfolio ...